note. changes may be made in this adl agenda. for meeting … · 2013-04-18 · ilevised meeting...

Note. Changes may be made in this adl 03/04/88 Agenda. For meeting information,

please call John DeMoully (415) 494-1335

Time Place March 10 (Thursday) 1:30 p.m. - 6:00 p.m. March 11 (Friday) 9:00 a.m. - 2:00 p.m.

Hyatt at LAX 6225 West Century Blvd. Los Angeles

(213) 670-9000

REVISED FINAL AGENDA

for meeting of

CALIFOElfIA LAW REVISION COMMISSION

Los Angeles March 10-11, 1988

1. Minutes of January 14 15. 1988. Commission Meeting (sent 2/10/88)

Ms. Barbano (representative of AARP) has called our attention to the following error in portion of the Minutes which reports her testimony, and she requests that the error be corrected: On page 51, line 4, substitute "$7,150" for "$2,000."

2. Recommended 1988 Legislation

Status of 1988 Commission Bills

Oral Report at Meeting

Study L 2008 AB 2779 (Urgency Bill)

Memorandum 88-7 (sent 2/18/88) First Supplement to Memorandum 88-7 (sent 3/3/88) Bill as Introduced (sent 1/19/88) Amended Bill (sent 2/24/88)

Study L-2009 - AB 2841 (1988 Probate Legislation)

Memorandum 88-8 (sent 2/22/88) First Supplement to Memorandum 88-8 (sent 2/26/88) Second Supplement to Memorandum 88-8 (sent 3/1/88) Third Supplement to Memorandum 88-8 (sent 3/2/88) Fourth Supplement to Memorandum 88-8 (sent 3/3/88) Fifth Supplement to Memorandum 88-8 (enclosed) Bill as Introduced (sent 2/1/88)

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Study L-2009 - Transitional Provisions for AB 2841

Memorandum 88-9 (sent 2/3/88) First Supplement to Memorandum 88-9 (sent 3/1/88)

ACR 42 (Attorneys' Fees Study Authorization)

Memorandum 88-24 (sent 2/22/88)

3. Study L-831 Recording of Personal Property Affidavit in Office of Recorder

Memorandum 88-10 (sent 1/26/88) First Supplement to Memorandum 88-10 (sent 2/18/88) Second Supplement to Memorandum 88-10 (sent 2/18/88)

4. Study L-3010 - Fees of Corporate Trustees

Memorandum 88-19 (sent 2/1/88) First Supplement to Memorandum 88-19 (sent 2/11/88) Second Supplement to Memorandum 88-19 (enclosed)

5. Study L-707- Misuse of Conservatorship Funds

Memorandum 88-5 (sent 1/26/88) First Supplement to Memorandum 88-5 (sent 2/18/88) Second Supplement to Memorandum 88-5 (sent 3/1188)

6. Study L-1030 - Notice to Decedent's Guardian or Conservator in Summary Proceedings for Small Estate


7. Study L-1036 - Attorney Fees in Probate

Memorandum 88-12 (sent 2/1/88) Memorandum 87-100 (sent 12/15/87;

another copy sent 2118/88) First Supplement to Memorandum 88-12

(sent 2/25/88)

ITEMS 7 AND 8; SPECIAL ORDER OF BUSINESS AT 4;00 P.M. Oll! THURSDAY. MARCH 10. OR IMMEDIATELY FOLLOWING AGEl!DA ITEM 6. WHICHEVER IS EARLIER

8. Study L-1055 - Fees of Personal Representative

Memorandum 88-13 (sent 2/1/88) Memorandum 87-107 (sent 12/15/87)

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9. Study B-111 - Commercial Lease Law (Assignment and Sublease)

SPECIAL ORDER OF BUSIBKSS AT 9:00 A.M. ON FRIDAY. MARCH 11

Memorandum 88-14 (sent 2/22/88) Background Study (attached to Memorandum)

10. Administrstive Matters

Extend Scheduled Meeting Hours If Necessary

Consultant to Study Administrative Law


Consultant to Study Uniform Rule Against Perpetuities Act


Suggestion for Priority for Study from Assembly Member Sher


Study of Issues Involved in Nonprobate Transfers


Communications from Interested Persons

11. Study L-1060 Multiple-Party Accounts

Memorandum 88-6 (sent 1/26/88) Draft of Tentative Recommendation (attached to Memorandum)

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IlEVISED MEETING SCHEDULE

ad2 01/21/88

NOTE. This schedule provides basically for a COJll1Jlission meeting every other month during the first half of 1988, reflecting the fact that substantial staff time will be consumed in worJr.ing on the 1988 legislative program and in preparing the final version of the new Probate Code for enactment in 1989.

March 1988 10 (Thursday) 11 (Friday)

May 1988 5 (Thursday) 6 (Friday)

July 1988 14 (Thursday) 15 (Friday)

September 1988 8 (Thursday) 9 (Friday)

October 1988 27 (Thursday) 28 (Friday)

December 1988 1 (Thursday) 2 (Friday)

1:30 p.m. - 6:00 p.m. 9:00 a.m. - 2:00 p.m.

1:30 p.m. - 6:00 p.m. 9:00 a.m. - 2:00 p.m.

1:30 p.m. - 6:00 p.m. 9:00 a.m. - 2:00 p.m.

1:30 p.m. - 6:00 p.m. 9:00 a.m. - 2:00 p.m.

1:30 p.m. - 6:00 p.m. 9:00 a.m. - 2:00 p.m.

1:30 p.m. - 6:00 p.m. 9:00 a.m. - 2:00 p.m.

Hyatt at LAX 6255 West Century Blvd. Los Angeles

(213) 670-9000

Sacramento

Los Angeles

San Francisco

Sacramento

Los Angeles

•

STUDY

0-1000

F-64l

H-lll

L-l

L-6l2

L-636

L-707

L-83l

L-l036

L-l055

L-l060

L-3005

L-3007

L-30l2

STATUS OF C~SSIOK STUDIES (as of February 18, 1988)

SUBJECT Staff Comm'n Work Review

Creditors' Remedies -- 2/88 Miscellaneous Matters

Limit Dispos Commun Prop

Commercial Leases -- 2/88 [3/88] Assi2nment & Sublease

New Probate Code 2/88

Simultaneous Death

No Contest Clause 1987 1/88

Misuse of Conservatorship 11/87 1/88 Funds

Recording Personal Property 12/87 1/88 Affidavit

Probate Attorneys' Fees 8/87 1/88

Personal Rep's Fees 10/87 [3/88]

Multiple Party Accounts 1987 [3/88]

Anti-Lapse & Other Rules 1/88 [3/88]

Ancestral Property Doctrine

Unif Manage Instit Funds

1988 Annual Report

[date] = scheduled

Approve Review Approve

to TR Comment Print

[3/88]

[3/88]

•

STATUS OF 1988 COMMISSION BILLS

(as of March 3, 1988)

Legislative Program:

AB 2779 (Harris): Urgency probate bill AB 2841 (Harris): Major probate bill ACR 42 (Harris): Attorney's fees study authorization SCR 62 (Lockyer): Continuing authority to study topics Spot bills (AB 3895 and AB 3896)

BILL STATUS AS 2779 AB 2841 ACR 42

Introduced Jan 13 Jan 26 Jan 20*

Assembly Judiciary Committee Mar 2 Mar 2 417187

Assembly Ways & Means Comrn **** ****

Passed Assembly 4114/87

Senate Judiciary Committee Mar 1

Senate Finance Committee ****

Passed Senate

Concurrence

To Governor

Signed by Governor

Chaptered by Date

Secretary of State Ch. #

SCR 62

Jan 14

Mar 1

****

*. ACR 42 introduced in 1987 and amended January 20, 1988, as attorney's fee study authorization

****: not applicable [j: date scheduled

Minutes March 10-11, 1988

MINUTES OF MEETING

of

CALIFORNIA LAW REVISION COMMISSION

MARCH 10-11, 1988

LOS ANGELES

A meeting of the California Law Revision Commission was held in

Los Angeles on March 10-11, 1988.

Commission: Present:

Absent:

Staff: Present:

Consultants:

Ann E. Stodden Chairperson

Forrest A. Plant Vice Chairperson

Roger Arnebergh

Elihu M. Harris Assembly Member

Bill Lockyer Senate Member

John H. DeMoully Nathaniel Sterling

,

Bion M. Gregory Arthur K. Marshall Vaughn R. Walker Tim Paone (Mar. 11)

Edwin K. Marzec

Stan G. Ulrich Robert J. Murphy III

William G. Coskran, Landlord and Tenant Law (Mar. 11)

Other Persons: Phyllis Cardoza, Beverly Hills Bar Association, Probate, Trust and

Estate Planning Section, Los Angeles Charles Collier, State Bar Estate Planning, Trust and Probate Law

Section, Los Angeles (Mar. 10) Ronald P. Deni tz, Tishman West Management Corp., Los Angeles (Mar.

11) Kenneth A. Feinfield, Executive Committee, Los Angeles County Bar

Association, Probate and Trust Law Section, Los Angeles (Mar. 10) Nancy E. Ferguson, California Probate Referees' Association,

Sacramento Irwin D. Goldring, Executive Committee, State Bar Estate Planning,

Trust and Probate Law Section, Los Angeles (Mar. 11) Michael Harrington, California Bankers Association, San Francisco Howard W. Lind, State Bar Real Property Section and Subsection on

Commercial and Industrial Real Estate, Oakland (Mar. 11) Valerie J. Merritt, State Bar Estate Planning, Trust and Probate Law

Section, Los Angeles (Mar. 11) Charles Masse, HALT of San Diego, Del Mar (Mar. 10) L. Bruce Norman, California Bankers Association, Los Angeles

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Jim Opel, State Bar Estate Planning, Trust and Probate Law Section, Los Angeles (Mar. 10)

Gloria S. Pitzer, Los Angeles County Bar Association, Probate and Trust Law Section, Los Angeles (Mar. 11)

Irv Reifman, California Probate Referees' Association, Los Angeles (Mar. 10)

Glenn Sonnenberg, State Bar Real Property Section and Subsection on Commercial and Industrial Real Estate (Mar. 11)

Kay Trout, California Probate Referees' Association, Los Angeles (Mar. 10)

Shirley Yawitz, California Probate Referees' Association, San Francisco

ADKIlIISTIlATIVE MATTERS

MINUTES OF January 14-15, 1988, MEETING

The Commission approved the Minutes of the January 14-15, 1988,

Commission meeting with the following correction:

On page 51, line 4, substitute "$7,150" for "$2,000."

EXTENSION OF SCHEDULED MEETING TIME

The time scheduled for the Commission meeting on May 5-6 in

Sacramento was extended on Friday, May 6, to 4:00 p.m. The Commission

will arrange to have lunch brought in and will work through lunch on

Friday if necessary to complete consideration of matters on the agenda

for that meeting.

RECORDING OF COMMISSION MEETINGS

The Commission adopted a policy that mechanical recording of

Commission meetings by persons other than the staff should be

prohibited. The reason for the prohibition is that recording might

hinder full and frank debate and impair the open-minded and flexible

attitude that must be brought to the type of work the Commission is

involved in. Recording of meetings by the staff is used only for the

purpose of preparing Minutes and redrafting statutes, and the tapes are

subsequently erased.

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APPROVAL OF CONSULTANT CONTRACT

The Commission considered Memorandum 88-15, relating to the

Commission's study of administrative law and procedure. The Commission

unanimously adopted a motion directing the Executive Secretary to

execute on behalf of the Commission a contract with Professor Michael

Asimow to prepare an analysis of the possible scope of a background

study on administrative law and procedure. The analysis would give the

Commission an overview of the field and the general problem areas that

exist, drawn from the cases and the literature and from persons

interested in the study. The analysis would be designed to help the

Commission decide what aspects of administrative law and procedure

could profitably be studied, and what sorts of priorities would be

involved. The staff will work out the details of the analysis with

Professor Asimow. The compensation for the analysis is to be $1250,

plus travel expenses not exceeding $250 in attending Commission

meetings. The analysis would be due July 31, 1988. The contract

should conform to the standard form of contract used by the Law

Revision Commission for expert consultants.

RECOMMENDED 1988 LEGISLATION

The Executive Secretary made the following report on the status of

the 1988 Commission bills.

Legislative Program:

AB 2779 (Harris): Urgency probate bill AB 2841 (Harris): Major probate bill ACR 42 (Harris): Attorney's fees study authorization SCR 62 (Lockyer): Continuing authority to study topics Spot bills (AB 3895 and AB 3896)

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BILL STATUS AB 2779 AB 2841 ACR 42 SCR 62

Introduced Jan 13 Jan 26 Jan 20 Jan 14

Assembly Judiciary Committee Mar 2 Mar 2 4/9/87

Assembly Ways & Means Comm It*** 517187

Passed Assembly 5114/87

Senate Judiciary Committee Mar 1 Mar 1

Senate Finance Committee

Passed Senate

Concurrence .

To Governor

Signed by Governor

Chaptered by Date

Secretary of State Ch. #

AB 2779 was passed out of the Assembly Judiciary Committee on the

consent calendar. AB 2841 was passed out of the Assembly Judiciary

Committee after amendments were made to delete the $250 cap on probate

referee commissions for appraising publicly traded stock, to require

appointment of a probate referee to receive notice of a waiver

peti tion, and to consolidate the inventory and appraisal in a single

document filed within four months after opening administration.

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STUDY H III ASSIGIIMEIIT AlID SUBLEASB

The Commission considered Memorandum 88-14, relating to assignment

and sublease issues in the commercial lease law study. The

Commission's consultant, Professor William G. Coskran, presented his

background study on this matter. His conclusions are summarized at

pages 90-97 of the study attached to Memorandum 88-14.

Professor Coskran supplemented the conclusions with a discussion

of California's adhesion contract doctrine and its potential use in

determining the validity of a landlord's "express sole discretion

standard" or an "absolute prohibition" clause relating to assignment or

sublease. Special considerations might apply to a long term ground

lease.

Howard W. Lind of Oakland, attending the meeting on behalf of the

Commercial and Industrial Subsection (North) of the California State

Bar Real Property Law Section, commented to the effect that the law in

this area is not clear and should be clarified by legislation. He felt

it is particularly important to make clear the extent to which lease

provisions affecting change in use are governed by the reasonableness

requirement of the Kendall case.

Ronald P. Denitz of Tishman West Management Corporation agreed

that there are real problems in practice in this area that need to be

clarified by statute.

Glenn A. Sonnenberg of Los Angeles, attending the meeting on

behalf of the Commercial and Industrial Subsection (South) of the

California State Bar Real Property Law Section, stated that

practitioners have concerns about Kendall, particularly its

retroactivity and whether it will be extended beyond "silent consent"

lease clauses. He noted that many lease clauses, including clauses in

ground leases, are heavily negotiated and should be upheld.

Legislation needs to be enacted that will ensure the parties of

certainty.

The Commission requested the staff to seek to obtain the

involvement in this study of persons representing tenants' interests.

Perhaps the State Bar's Housing/Residential subcommittee would be

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interested, or the California Association of Realtors, or other more

specialized commercial brokers' associations.

some tenant expertise, for example in the

Services.

The State may also have

Department of General

Although the Commission made no decisions on the scope of this

project, several Commissioners expressed views about what should be

covered. These matters include, (1) residential as well as commercial

leases, and (2) consent provisions in leases concerning matters other

than assignment and sublease, including change of use.

The Commission decided to attempt to draft a recommendation in

this area for the 1989 legislative session, and requested the staff to

schedule the matter for policy decisions at the May 1988 meeting. The

Commission expressed its appreciation to persons attending the meeting

and commenting on the study, and invited them to return for the May

meeting.

STUDY L-707 -- MISUSB OF CONSBRVATORSHIP FUNDS

The Commission considered Memorandum 88-5 and the First and Second

Supplements concerning misuse of conservatorship funds. Since several

bills on the subject have been introduced (SB 1957, SB 2351, SB 2352),

the Commission decided not to take any action now. Senate Bill 1957

(Rogers) would require the Judicial Council to develop an information

pamphlet for guardians. If this bill is enacted, the staff should

consider whether the Commission should recommend that the Judicial

Council be required to prepare a pamphlet explaining the duties of

other fiduciaries, such as conservators, personal representatives, and

trustees.

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STUDY L-831 - RECORDING OF PERSONAL PROPERTY AFFIDAVIT

Ill" OFFICE OF RECORDER

The Commission considered Memorandum 88-10 and the First and

Second Supplements to Memorandum 88-10, together with a report from

William V. Schmidt on behalf of State Bar Study Team 1 (Exhibit 1

attached to these Minutes).

The Commission approved the following amendment to Section 13101

of the Probate Code:

13101. (a) To collect money, receive tangible personal property, or have evidences of a debt, obligation, interest, right, security, or chose in action transferred under this chapter, an affidavit or a declaration under penalty of perjury under the laws of this state shall be furnished to the holder of the decedent's property stating all of the following:

(1) The decedent's name. (2) The date and place of the decedent's death. (3) "At least 40 days have elapsed since the death of

the decedent, as shown in a certified copy of the decedent's death certificate attached to this affidavit or declaration."

(4) "No proceeding is now being or has been conducted in California for administration of the decedent's estate."

(5) "The gross value of the decedent's real and personal property in California, excluding the property described in Section 13050 of the California Probate Code, does not exceed sixty thousand dollars ($60,000)."

(6) A description of the property of the decedent that is to be paid, transferred, or delivered to the affiant or declarant.

(7) The name of the successor of the decedent (as defined in Section 13006 of the California Probate Code) to the described property.

(8) Either of the following, as appropriate: (A) "The affiant or declarant is the successor of the

decedent (as defined in Section 13006 of the California Probate Code) to the decedent's interest in the described property."

(B) "The affiant or declarant is authorized under Section 13051 of the California Probate Code to act on behalf of the successor of the decedent (as defined in Section 13006 of the California Probate Code) with respect to the decedent's interest in the described property."

(9) "No other person has a right to the interest of the decedent in the described property."

(10) "The affiant or declarant requests that the described property be paid, delivered, or transferred to the affiant or declarant."

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(11) "The affiant or declarant affi rms or declares under penalty of perjury under the laws of the State of California that the foregoing is true and correct."

(b) Where more than one person executes the affidavit or declaration under this section, the statements required by subdivision (a) shall be modified as appropriate to reflect that fact.

ec) If the particular item of property to be transferred under this chapter is a debt or other obligation secured by a lien on real property and the instrument creating the lien has been recorded in the office of the county recorder of the county where the real property is located. the affidavit or declaration shall satisfy the requirements both of this section and Section 13106.5.

fe~ fQl A certified copy of the decedent's death certificate shall be attached to the affidavit or declaration.

The staff has prepared a Comment to amended Section 13101 that

will read:

CODIIIent. Subdivision (c) is added to Section 13101 to alert the person preparing or using the affidavi t or declaration to the additional requirements of Section 13106.5. Where the item of property transferred is an obligation secured by a lien on real property, Section 13106.5 requires that, in addition to the requirementa of Section 13101, the affidavit or declaration include the recording reference to the instrument creating the lien and a notary public's certificate of acknowledgment identifying each person executing the affidavit or declaration.

Where the particular item of property transferred under this chapter is an obligation secured by a lien on real property, Section 13106.5 requires that the affidavit or declaration be recorded in the office of the county recorder of the county where the real property is located. Any duty of the obligor under Section 13105 to pay the successor of the decedent or otherwise to satisfy the obligation does not arise until the obligor has been furnished with satisfactory evidence that the affidavit or declaration has been recorded and satisfies the requirements of Section 13101 and subdivision (a) of Section 13106.5. Such evidence might be, for example, a certified copy of the recorded affidavit or declaration, but any other satisfactory evidence of the recorded affUavi t or declaration would be sufficient. The reference to Civil Code Section 2935 in subdivision (b) of Section 13106.5 makes clear that the recording of the affidavit or declaration is not itself notice to the obligor so as to invalidate a payment made to the holder of the note secured by the lien on the real property.

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New Section 13106.5 of the Probate Code (as proposed by Assembly

Bill 1779) was revised to read:

13106.5. (a) If the particular item of property transferred under this chapter is a debt or other obligation secured by a lien on real property and the instrument creating the lien has been recorded in the office of the county recorder of the county where the real property is located, the affidavit or declaration described in Section 13101 shall be recorded in the office of the county recorder of that county and, in addition to the contents required by Section 13101, shall include both of the following:

(1) The recording reference of the instrument creating the lien.

(2) A notary public's identifying each person declaration.

certificate of executing the

acknowledgment affidavi t or

fB~-~-QQ~-~-~-9B±!g&P-~-~~-~~~-&&-pay ~Re-~-&~-~~-deeedeB~-~-~~~-&&-~~~-~Re

&B±!g&~!&B--~-~~--a~!ge--~4~--~~-~~-~--BeeB

~B~!9Red--~~~-~--eep~!~!ed--~--&~--~fie--~~~--&P

dee±a~a~!9B-pee9*ded-BBde*-9BBd!Y!9!&B-fa~T fe~ ill The transfer under this chapter of the debt or

obligation secured by a lien on real property has the same effect as would be given to an assignment of the right to collect the debt or enforce the obligation. The recording of the affidavit or declaration under subdivision (a) shall be given the same effect as is given under See~!&B-±9~4 Sections 1934 and 1935 of the Civil Code to recording an assignment of a mortgage and an assignment of the beneficial interest under a deed of trust.

(c) If a deed of trust upon the real property was given to secure the debt and the requirements of subdivision (a) and of Sections 13100 to 13103. inclusive. are satisfied:

(1) The trustee under the deed of trust may rely in good faith on the statements made in the affidavit or declaration and has no duty to inquire into the truth of any statement in the affidavit or declaration.

(2) A good faith purchaser or lessee of the real property for value from. or a good fai th lender to. the obligor on the debt may rely upon a recorded reconveyance of the trustee under the deed of trust.

(d) I f a mortgage upon the real property was given to secure the debt and the requirements of subdivision (a) and of Sections 13100 to 13103, inclusive, are satisfied. a good faith purchaser or lessee of the real property for value from, or a good faith lender to. the obligor on the debt may rely upon a recorded discharge of the mortgage executed by the person or persons executing the affidavit or declaration as successor of the decedent or by their successors in interest.

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The Comment to Section 13106.5 was approved to read substantially

as follows:

Comment. Section 13106.5 is a new provision that covers the situation where the particular item of property transferred under this chapter is a debt (including a promissory note) secured by a lien on real property.

Where the instrument (including a mortgage or deed of trust) creating the lien has been recorded, subdivision (a) requires that the affidavit or declaration be recorded in the office of the county recorder of the county where the real property is located instead of being furnished to the holder of the property as required by the introductory clause of subdivision (a) of Section 13101. Recording of the affidavit or declaration in the real property records is mandatory so that the title records will reflect the transfer of the debt and securi ty interest under this chapter to the person or persons executing the affidavit or declaration as successor of the decedent and to establish of record their authority to execute a satisfaction or release of the mortgage where the debt is secured by a mortgage.

The affidavit or declaration must be in the form prescribed by Section 13101 and must also satisfy the requirements of paragraphs (1) and (2) of subdivision (a) of Section 13106.5. The affidavit or declaration must be executed under penalty of perjury under the laws of the State of California. See Section 13101(a) (ll). A certified copy of the decedent's death certificate must be attached to the affidavit or declaration. Section 13101(d).

Subdivision (a) (1) requires that the recording reference of the instrument creating the lien be included in the affidavit or declaration. This information will make it easier to locate the recorded lien instrument. Additionally, the recording reference will insure that the affidavit or declaration relates to an obligation secured by a lien on real property.

Subdivision (a)(2) requires that the affidavit or declaration include a notary public's certificate of acknowledgment identifying each person executing the affidavit or declaration. This is required because the affidavit or declaration is to be recorded in the real property records. The requirement also avoids the need to furnish the obligor on the debt with additional proof of the identity of each person executing the affidavit or declaration. See Section 13104(e).

Under subdivision (b), the transfer of the debt under this chapter is given the same effect as the assignment of the debt. It is a well established principle of law that the assignment of a debt carries with it the security for the payment of the debt. Thus, the assignment of a debt secured by a mortgage carries the mortgage with it (Civil Code § 2936); and, when a power to sell is given to a mortgagee or

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other encwnbrancer in an instrwnent intended to secure the payment of money, the power is deemed a part of the security and vests in the person who by assignment becomes entitled to the money, and the power of sale may be executed by that person if the assignment is acknowledged and recorded (Civil Code § 2932.5).

The person or persons executing the affidavi t or declaration as successor of the decedent have the same rights and duties they would have if they were an assignee of the mortgage or an assignee of the beneficial interest under the deed of trust. See Civil Code § 2941. Giving these persons these rights would, for example, permit a title insurer to rely upon the affidavit or declaration in case of the recording of a notice of default in a non-judicial foreclosure of the deed of trust or the mortgage (with a power of sale). The duties include, for example, the duty to execute a certificate of discharge of the mortgage if the lien is secured by a mortgage.

Under subdivision (b), the recording of the affidavit or declaration operates as constructive notice of its contents to all persons. See Civil Code § 2934. Any duty of the obligor under Section 13105 to pay the successor of the decedent or otherwise to satisfy the obligation does not arise until the obligor has been furnished with satisfactory evidence that the affidavit or declaration has been recorded and satisfies the requirements of subdivision (a). Such evidence might be, for example, a cert i fied copy of the recorded affidavit or declaration, but any other satisfactory evidence of the recorded affidavit or declaration would be sufficient. The reference to Civil Code Section 2935 in subdivision (b) makes clear that the recording of the affidavit or declaration is not itself notice to the obligor so as to invalidate a payment made to the holder of the note secured by the lien on the real property.

Subdivision (c) makes clear that the trustee under the deed of trust can execute a reconveyance in reliance upon the statements made in the affidavi t or declaration and protects a good faith purchaser, lessee, or lender who relies upon the recorded reconveyance. Subdivision (d) makes clear that a good fai th purchaser, lessee, or lender may rely in good faith upon a recorded discharge of the mortgage executed by the person or persons executing the affidavit or declaration as successor of the decedent (or by the successor in interest of such a person). These protections are consistent with the protection given the holder of the decedent's property under Section 13106. They are necessary to protect the obligor on the debt who has paid the debt to the person or persons executing the affidavit or declaration and needs to have the property title records reflect the fact that the debt has been paid and the security released.

-11-


Except as specifically provided in Section 13106.5, the provisions of this chapter--including but not limited to Sections 13109-13113 (liability of persons to whom payment, delivery, or transfer of property is made under this chapter)--apply to money collected pursuant to Section 13106.5.

Section 13106.5 covers not only the right to payment of a debt secured by a lien on real property, but also the right to enforce an obligation the performance of which is secured by a lien on real property.

Assembly Bill 2779 is to be amended to effectuate the decisions of

the Commission concerning Probate Code Sections 13101 and 13106.5.

STUDY L-l036 ArrORltKY FEES III PROBATE PROCEEDING

The Commission considered Memorandum 87-100, Memorandum 88-12, and

the First Supplement to Memorandum 88-12, concerning attorney fees in

probate. The Commission accepted a written statement from Charles

Mosse on behalf of the San Diego chapter of HALT. A copy of Mr.

Mosse's statement is attached to these Minutes as Exhibit 2. The

Commission made the decisions described below.

STATUTORY FEE SCHEDULE

The Commission unanimously decided to retain the statutory fee

concept and rejected the reasonable fee standard of the Uniform Probate

Code.

The Commission unanimously decided to reduce the four percent rate

on the first $15,000 of estate value (Prob. Code § 901) to three

percent. Thus, the fee would be three percent on the first $100,000

of estate value.

The Commission decided that the statute should not provide a fixed

dollar amount as a minimum fee.

The Commission decided not to give the court authority to reduce

the statutory fee where it is shown that the statutory fee is clearly

excessive or unconscionable under the circumstances of the particular

case. Commissioner Walker requested that he be recorded as voting in

favor of giving the court this authority.

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EXTRAORDINARY SERVICES

The Commission asked the staff to draft a statement of standards

or factors to be considered by the court in fixing fees for

extraordinary services. The statement of standards or factors should

take into account that the attorney may have performed extraordinary

services pursuant to court order. Complexity and results obtained

should be significant factors. Time spent by the attorney should not

be the primary consideration in fixing the attorney fee for

extraordinary services.

The Commission decided not to add a provision to the statute to

limi t the fees for extraordinary services to cases where the court

determines that the statutory fee is inadequate under the circumstances

of the particular case. Attorneys and courts are familiar with the

rule in Estate of Walker, 221 Cal. App. 2d 792, 795, 34 Cal. Rptr. 832

(1963), that in deciding whether to award fees for extraordinary

services the court may consider whether the statutory fee for ordinary

services is adequate compensation for both ordinary and extraordinary

services.

The Commission decided not to continue in the statute the partial

list of extraordinary services now found in Probate Code Section 902.

Instead, the Comment should include a more comprehensive list of what

constitutes extraordinary services. A useful list may be found in the

Report of Ad Hoc Committee on Attorney Fees in Probate (May 15, 1985),

reprinted as appendix to Los Angeles County Probate Policy Memorandum

in California Local Probate Rules (9th ed. Cal. Cont. Ed. Bar 1988).

WRITTEN CONTRACT REQUIREMENT

The Commission decided it should be made clear that Business and

Professions Code Section 6148(a) applies in a case where the attorney

fee is set by statute or court rule. This will make clear that written

contracts are required for attorney fees in all types of cases where

these is no specific exception in Section 6148. (Section 6148 does not

apply to contingent fee contracts, or to cases where it is reasonably

foreseeable that the total expense to a client (including attorney

fees) will not exceed $1,000, where the services are rendered in an

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emergency or where a writing is otherwise impractical, where the fee is

implied by prior relationship, where there is a written waiver, or

where the client is a corporation.)

DISCLOSURE THAT STATUTORY FEE IS SUBJECT TO NEGOTIATION

The Commission decided by a four to three vote to require that the

estate attorney disclose to the personal representative that,

notwithstanding the statutory fee schedule, the attorney and personal

representative may negotiate and agree to a lower fee. Commissioners

S todden, Marshall, Paone, and Walker voted in favor. Commissioners

Arnebergh, Gregory, and Plant voted against. The disclosure provision

should go with provisions requiring written contracts for attorney

fees. Bus. & Prof. Code §§ 6147-6148.

MISCELLANEOUS

The Commission decided to keep existing law that gross value of

estate property is used to fix the fee (Prob. Code § 901), and rejected

net value used by some states.

The Commission decided not to require by statute that attorney

fees for services in connection with nonprobate property be reasonable.

The Commission decided to keep existing law that the decedent's

will may provide for the attorney's fee, and that the fee provided by

will is full compensation for the attorney's services unless the

attorney renounces it. See Prob. Code §§ 900, 910.

The Commission decided to keep existing law that, unless dual

compensation is expressly authorized in the decedent's will, an

attorney who serves as personal representative is entitled to

compensation as personal representative but not for services as estate

attorney.

The Commission asked the staff to write a memorandum on the

practice of the personal representative hiring the estate attorney to

perform some duties of the personal representative and paying the

attorney out of his or her own funds, not funds of the estate. The

staff study attached to Memorandum 87-100 (page 93) refers to but does

not cite local court rules that require such an agreement to be

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disclosed to and approved by the court. The staff recommended a

statute providing that court approval is not necessary. The Commission

asked the staff to cite the local court rules that would be invalidated

by such a statute.

The Commission did not discuss the staff recommendation to lower

the estate size defining the highest bracket (reasonable fee) from $25

million to $10 million.

STDDY L--I055 - FEES 01" PERSOfiAL RKPRKSEIrrATIVK

The Commission considered Memorandum 87-107 and Memorandum 88-13,

concerning fees of personal representatives. The staff should draft a

statute for Commission consideration that is consistent with the

decisions made concerning attorney fees in probate. The lowest

percentage rate should be reduced from four (Prob. Code § 901) to three

percent, the same as the attorney fee. The draft which the staff will

prepare of a statement of standards or factors to be considered by the

court in fixing fees for extraordinary services should apply to the

personal representative as well as to the estate attorney. The

requirement that the attorney disclose to the client that the attorney

fee is negotiable should not apply to the compensation of the personal

representative.

STDDY L--2008 - AS 2779 (URGEBCY BILL)

The Commission considered Memorandum 88-7, the First Supplement to

Memorandum 88-7, and two reports from State Bar Study Team 1 (Exhibits

3 and 4, attached to these Minutes), relating to AB 2779 (1988 urgency

bill). The Commission approved the following amendments to the bill.

AMENDMENT 1 On page 19, between lines 3 and 4, insert: SEC. 13.3. Section 1211 is added to the Probate Code,

to read:

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1211. If a notice is required by this code and no other type of notice is prescribed by law, by the Judicial Council, or by the court or judge, the notice shall be in substantially the following form:

SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE (CITY AND) COUNTY OF ____ _

Estate of ______________________ __ No.

NOTICE OF HEARING (If to be published, describe purport or character of the notice to be given.)

Notice is hereby given that (name of petitioner and representative capacity, if any) has filed herein a (nature of petition, application, report, or account), reference to which is made for further particulars, and that the time and place of hearing the same has been set for (date) at _m., in the courtroom (of Department No. ____ , if any) of said court, at (the courthouse, or state other location of the court), in the City of , California. Dated

_____________________ , Clerk

By ___________________ , Deputy Clerk

AMENDMENT 2 On page 20, line 32, strike out "acknowlegement" and

insert: acknowledgment

AMENDMENT 3 On page 22, following line 40, insert: SEC. 19.5. Section 17101 of the Probate Code is amended

to read: 17101. If notice of the time and place of a hearing is

required to be given, the notice shall be in the form prescribed by the Judicial Councilor, if the Judicial Council has not prescribed an applicable form, in compliance with Section 1~99Tl 1211.

AMENDMENT 4 On page 23, between lines 17 and 18, insert: SEC. 21.5. Section 21525 of the Probate Code is amended

to read: 21525. (a) If an instrument that makes a marital

deduction gift includes a condition that the transferor's spouse survive the transferor by a period that exceeds or may

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exceed six months, other than a condition described in subdivision (b), the condition shall be limited to six months as applied to the marital deduction gift.

(b) If an instrument that makes a marital deduction gift includes a condition that the transferor's spouse survive a common disaster that results in the death of the transferor, the condition shall be limited to the time of the final audit of the federal estate tax return for the transferor's estate, if any, as applied to the marital deduction gift.

(c) The amendment of subdivision (a) made by the act that enacted this subdivision is declaratory of, and not a change in, either existing law or former Section 1036.

The Comment that accompanies the amendment to Section 21525 states:

Comment. Subdivision (a) of Section 21525 is amended to make clear that a survival requirement that is not fixed in duration is limited to six months for a marital deduction gift, just as is a survival requirement of fixed duration that exceeds six months. For example, if an instrument that makes a marital deduction gift requires that the spouse aurvive the decedent until the date of distribution, subdivision (a) would impose a six month limitation on the requirement.

This clarification is a specific application of the general intent of this chapter that a transferor's intent to make a marital deduction gift overrides any conflicting intent expressed by language in the instrument that may disqualify the gift from the federal estate tax marital deduction. Therefore, language in an instrument that would disqualify a gift from the marital deduction should be disregarded or interpreted in light of the overriding intent to obtain the marital deduction.

The amendment of subdivision (a) is declaratory of, and not a change in, existing law. Subdivision (c) emphasizes the fact that the amendment merely clarifies the Legislature's intent in originally enacting former Section 1036 (Cal. Stats. 1982, ch. 41, § 3) as well as in restating former Section 1036 without substantive change in subdivision (a) of Section 21525 (Cal. Stats. 1987, ch. 923, § 101). See also Section 21501 (application of part) and former Section 1031 (application of former article).

STUDY L-2009 - AS 2841 (1988 PROBATE LEGISLATION)

The Commission considered Memorandum 88-8, the First through Sixth

Supplements to Memorandum 88-8, and letters (copies attached to these

Minutes) from State Bar Study Team 1 (Exhibit 5), State Bar Study Team

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2 (Exhibit 6), Charles A. Collier, Jr. (Exhibit 7), and the Beverly

Hills Bar Association (Exhibit 8), relating to AB 2841 (1988 probate

legislation) . The Commission authorized the staff to make such

teclmical revisions in the bill as appear proper in light of the

comments submitted to the Commission.

The Commission discussed at length the amendments made in the

Assembly Judiciary Committee relating to inventory and appraisal and

probate referees. The Commission decided to request Assemblyman Harris

to remove from the bill the provisions relating to inventory and

appraisal and probate referees. He should be made aware that the

Commission no longer recommends these provisions of the bill, if they

are left in the bill. The Senate should also be made aware of the

Commission's position if the provisions are left in the bill. However,

the Commission continues to recommend the remainder of the bill.

The Commission also made the following decisions concerning the

bill.

§ 1003. Appointment of guardian ad li tern. Subdivision (c) was

revised to provide for expenses to be paid out of the property of the

estate involved or by the petitioner "or from such other source as the

court orders." The staff should review for consistency other

provisions where similar language is used, and should make sure that

references to expenses, compensation, and fees, are used consistently

in the Probate Code.

§ 2631. Death of ward or conservatee. The reference to "charges"

should be deleted from this section, unless the staff is able to find a

derivation for the term that indicates its intended scope.

§ 8113. Notice involving foreign citizen. The staff should check

with the U.S. Department of State to see whether the reference to

"treaty rights" in subdivision (b) uses proper terminology.

§ 8121. Publication of notice. The staff should check with the

newspaper publishers to see whether the phrase "published for at least

10 [or 15, as the bill is being amended] days" can be clarified.

§ 8125. Contents of subsequent published notice. This section

should apply only to any subsequent publication of the notice "ordered

by the court."

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§ 8441. Priority for appointment as administrator with the will

annexed. Subdivision (b) of this section was revised to read:

(b) A person who takes under the will has priority over a person who does not, but the court in its discretion may give priority to a person who does not take under the will if the person is entitled to a statutory interest that is a substantially greater portion of the estate than the devise to the person who takes under the will and the priority appears appropriate under the circumstances. A person who takes more than 50 percent of the value of the estate under the will or the person's nominee, or the nominee of several persons who together take more than 50 percent of the value of the estate under the will, has priority over other persons who take under the will.

The Comment should make clear that this provision is intended to apply

to a person who takes by intestate succession or as an omitted heir.

§ 8547. Fees and commissions. This section should be revised to

allow the special administrator to be awarded extraordinary fees

without waiting until the close of administration.

§ 9103. Late claims. The "clear and convincing evidence"

standard should be replaced by a simple requirement that the claimant

establish the circumstances that qualify the claimant for a late

claim. This change should be made in AB 1779 (urgency bill) as well as

in AB 2841.

The requirement in subdivision (a)(l) that the petition be filed

within 30 days after the creditor or the creditor'S attorney had actual

knowledge of administration should be revised to make clear that the 30

days commences to run on the first to occur of these events.

§ 9353. Bar of rejected claims. This section should be revised

to provide that in the case of a pending action against the decedent,

if the claim is rejected the claimant must act to substitute the

personal representative as a party within three months after rejection.

§ 10954. When an account is not required. In subdivision (b),

the phrase "by the following persons" should be replaced by the phrase

"as follows". Subdivision (b)(4) should be revised to make clear that

the court's approval is not necessary in the case of a supervised trust

and subdivision (b)(5) should be revised to make clear that the court's

approval is not necessary in the case of a probate estate.

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§ 11004. Settlement of claim not paid in full. This section was

deleted from the bill.

§ 12002. Income and expenses of specific devise. The staff

should revise subdivision (b) and the Comment to make clear that the

taxes and expenses referred to are those that relate specifically to

the property, including income tax attributable to income generated by

the property that goes to the specific devisee.

A provision should be added that interest on sale proceeds of

specifically devised property is allocated to the specific devisee.

§ 12005. Interest on devise for maintenance. The Comment to this

section should make clear that a devise for maintenance includes a

devise for support.

§ 12006. Remaining income to residuary or intestate

distributees. Subdivision (b) of this section was deleted.

§ 16314. Interest on trust distributions. This section was

replaced by the substance of following provision:

A specific gift, a general pecuniary gift, an annuity, and a gift for maintenance distributable under a trust carries with it income or bears interest from the date of the settlor's death or such other event as the distributee'S right to receive it occurs, in the same manner as a specific devise, a general pecuniary devise, an annuity, and a devise for maintenance under a will set forth in Chapter 8 (commencing with Section 12000) of Part 10 of Division 7.

STUDY 1.-2009 tRARSITIOBAL PROVISIONS FOR AS 2841

The Commission considered Memorandum 88-9 and the First Supplement

thereto, relating to transitional provisions for AB 2841. The

Commission approved the transitional provisions set out in the

memorandum for inclusion in the bill, with the following changes.

§ 3. General transitional provision. The statute should refer to

"the" new law rather than "a" new law throughout. The Comment should

note that the transitional provision governs all changes in the law,

including reenactments and recodifications. Subdivision (d) was

revised to provide, in substance:

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(d) If a petition, account, report, inventory, appraisal, or other document or paper is filed before the operative date, the contents, execution, and notice thereof are governed by the old law and not by the new law, but any subsequent proceedings taken after the operative date concerning the petition, account, report, inventory, appraisal, or other document or paper, including an objection or response, a hearing, an order, or other matter relating thereto is governed by the new law and not by the old law.

Inventory and appraisal. These transitional provisions should be

omitted from the bill on the assumption that the basic inventory and

appraisal and probate referee provisions will be deleted from the

bill. The Commission will review these provisions in connection with

its further study of the basic substantive issues.

§ 10955. Accounts. This section should be omitted from the bill.

§ 16315. Interest and income accruing during trust

administration. This provision should refer to the specific sections

in the trust law in which changes are made. The Comment should refer

to provisions that allow the instrument to specify rules for allocation

of interest and income.

§ 9357. Litigation involving decedents. The date of commencement

of an action, rather than the date of death, should be the critical

time in determining whether new law or old law applies to the action.

§ 2903. Public guardians. The phrase "notwithstanding its repeal

by the act that enacted this chapter" should be added at the end of

this provision.

§ 12574. Nondomiciliary decedents. The extra "the" should be

deleted from the second line of the section. A sentence should be

added that nothing in the section limits the right to use the new

affidavit procedure. The Comment should elaborate this concept.

STUDY L-3010 - FEES OF CORPORATE TRUSTEES

The Commission considered Memorandum 88-19 forwarding the request

from Assembly Member Harris to reopen the study of corporate trustees'

fees. The Commission also considered the First and Second Supplements

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to the memorandum and the oral and written remarks of the Executive

Commi ttee of the State Bar Estate Planning, Trust and Probate Law

Section and the California Bankers Association. (See Exhibit 9,

attached to these Minutes, stating the position of the Trust State

Governmental Affairs Committee of the California Bankers Assoda tion.)

The Commission decided to reopen this study with a view toward

considering various suggested statutory approaches. The staff was also

directed to seek additional opinions from probate judges and from

groups in a position to assess the views of trust "consumers," such as

the American Association of Retired Persons.

APPROVED AS SUBMITTED ______ _

APPROVED AS CORRECTED ____ (for corrections, see Minutes of next meeting)

Date

Chairperson

Executive Secretary

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•

EXHIBIT 1 6/213/007072-0093/24

REPORT

TO: VALERIE J. MERRITT D. KEITH BILTER IRWIN D. GOLDRING CHARLES A. COLLIER, JR. JAMES D. DEVINE JAMES C. OPEL THEODORE J. CRANSTON JAMES V. OUILLlNAN THE EXECUTIVE COMMITTEE IN GENERAL


PROM: WILLIAM V. SCHMIDT. STUDY TEAM NO.1

DATE: MARCH 7. 1988

SUBJECT: FIRST AND SECOND SUPPLEMENT TO LRC MEMORANDUM 88-10

This report is prepared on behalf of Study Team No. 1

solely by William V. Schmidt in view of shortness of time.

Since the next Law Revision Commission meeting is set for

March 10 and 11, 1988, I did not feel that we had sufficient

time to arrange a conference call to receive the input of the

entire study team.

The First Supplement is in response to a letter received

from John C. Hoag, Vice President Senior Associate Title

Counsel of Ticor Title Insurance Company in Los Angeles. As

a result of Mr. Hoag's letter new subsections (d) and (e) of

Section 13106.5 are proposed by the staff together with

appropriate changes in the Comment.

I feel that the general concept is good and I see no

technical problems with the proposed new subsections.

•

•

6/213/007072-0093/24

However, this is not an area of law with which I am

intimately familiar. Certainly the proposed changes should

be reviewed by Mr. Hoag and possibly other Title Company

attorneys.

In regard to the Second Supplement to Memorandum 88-10,

I approve of the new proposed subsection (cl to Section 13101

in accordance with the suggestion of Charles Collier.

The deletion by the s~aff of subdivision (bl of Section

13106.5 and the revision of the second section of subdivision

(cl together with the proposed revision to the Comment seem

to me to be satisfactory. Again, I am uncomfortable in

trying to judge these p~oposed sections by myself in an area

with which I am not intimately familiar. Civil Code Sections

2934 and 2935 are not ones that I deal with on a regular or

frequent basis.

In regard to whether or not the recording of the

affidavit or declaration should be mandatory or permissive, I

tend to agree with the staff and feel that the requirement

that the recording be mandatory will serve the public

interest in the majority of the cases. Even if the recording

was not mandatory it seems to me that the parties involved.

would want to record the affidavit or declaration in the

majority of the cases. I would point out, however, that the

suggestion that the recording be permissive arose at the

February meeting of the Executive Committee and met with no

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• •

\

6/213/007072-0093/24

real opposition. Although we did not spend a great deal of

time on it, it seemed to represent the view of· the majority

of the members of the Executive Committee at the time it was -

discussed. I did not get the feeling, however, that the

Executive Committee would seriously object to a mandatory

requirement particularly if such a requirement was supported

by the Title Insurance Companies.

Respectfully submitted.

#{,_ // dL"-.4r William V. SChmidt

-3-

• •

EXHIBIT 2

Testimony of

Charles Mosse Representative, HALT - San Diego

Regarding


Probate Reform Provosals Contained in Memorandum 88-12

Presented to the California Law Revision Commission

Los Angeles, California

March 10, 1988

I am Charles Mosse, a representative of HALT - San Diego. HALT - San Diego is a chapter of HALT - An Organization of Americans for Legal Reform, the only national public interest organization working to make the legai system more simple, affordable, and equitable for legal consumers. As I noted in my January statement, HALT has more than 28,000 members in the state of California and more than 2,700 members in the San Diego area.

At your January meeting, you asked for public comment about two issues: whether the statutory percentage fee system should be retained, and whether the new law requiring written attorney-client contracts applied to probate lawyers. We realize that you weren't anticipating further public comment but, in light of the Commission staff's recent recommendations (contained in Memorandum 88-12), we thought it important for consumers to be heard once again. Thank you for affording us this opportunity.

The Basic Issue: Statutory Percentage Fees

HALT-San Diego is puzzled and disturbed that the Commission appears inclined to retain the statutory percentage fee system. 'We are puzzled because none of the staff's documents offer any explanation or justification for such a decision. We are disturbed because, from consumers' point-of-view, there is no adequate justification to retain an unfair and arbitrary system.

In scouring Memorandum 87-100, the staff's voluminous study, we are struck by the weakness, paternalism, and self-interest of the probate bar's arguments in favor of percentage fees:

I'm getting old - I resent change - I think the old system works well.

Statutory fee avoids fee shopping.

The curr.ent percentage method is easy for the client to understand .

.. . . 1

Few clients have any understanding of an "appropriate" fee.

System minimizes fee disputes.

[Under reasonable fee system] [1]ots more time would go into recording time & Ii tiga ting fees.

Judges have no idea of how expensive it is to practice.

I would not be able to meet my overhead if the clients could dictate the amount of the fees. I would probably go out of business.

Although many of the attorneys surveyed were honest enough to admit that clients could handle fee negotiations (if this weren't true, why is there so much concern about comparison shopping?) and that percentage fees are often excessive (if this weren't true, why all the talk about the expense of practicing and going out of business?), the comments of many others reveal a pervasive anti-consumer bias.

On what is the Commission basing its inclination to keep percentage fees? There is no need to repeat our criticisms of the percentage fee system outlined in our January testimony. Instead, we urge you to pay attention to the comments of legal-services consumers and those in the probate bar who were honest enough to admit the system's flaws. The Commission would do a great disservice to the public to recommend keeping the percentage fee system on the basis of the anti-consumer pleas of some probate lawyers.

Court Authority to Reduce Excessive Probate Fees

Further, HALT-San Diego emphatically disagrees with the staff's conclusion that authorizing the court to lower fees somehow justifies keeping the statutory percentage fee system. At best, this reform just makes an unfair system a little less unfair. It does not make it fair. Because the system is based on a faulty premise (i.e., that the value of the estate is a fair and reasonable basis for setting fees); it produces unfair results (i.e., unreasonable fees).

But, if you do decide to recommend keeping percentage fees, it is absolutely vital that you also recommend giving courts the power to lower fees found to be excessive. As it currently stands, attorneys are guaranteed and routinely collect the statutory percentage, with the option of getting more for "extraordinary" services. Although the statute says these percentages are maximums, in reality, they are often the minimums. Filing compensation petitions with the court is almost meaningless, from consumers' perspective, if the court's only role is to rubber-stamp them or rule on requests for even more money.

Judicial review should always be available upon the filing of an objection, whether that objection is to the will, the performance of the personal representative, or the attorney's fee. The entire rationale for requiring decedents' estates to go through probate at all is to protect the decedent's interests by preserving the estate. In reality, the court's role

2

is minimal. But, just as in other areas of law where transfer of property is involved, the court's only legitimate role in the context of probate is to resolve any disputes that may arise. We see no good reason to exempt disputes about attorney fees, and what can go up should be able to come down.

, Moreover, simply authorizing the court to lower fees, and doing nothing more, is

insufficient. Inherent in the statutory fee system is a presumption that the statutory percentage is reasonable. Allowing consumers to petition to lower the fee merely allows consumers to rebut this presumption. Without additional reforms, it places on consumers the burden of fighting, but with no ammunition, thereby rendering the "right" empty.

To undel~stand this, one only need consider under what circumstances a consumer might have a good case that a fee was excessive. The most obvious case would be one where, because of pre-death planning or the liquidity of the assets, the work was minimal, yet, because of the estate's size, the statutory percentage yields a very high fee. As a practical matter, how does the consumer prove the work was minimal? For that matter, how does the attorney prove the fee is reasonable? The attorney isn't required to keep time or other work records, and what evidence of minimal work there may be is in the attorney's control.

The bar is right - to permit courts to reduce excessive fees would both "destroy the concept of statutory fees as a [sic] simple reasonable compensation" and "result in the ... fee in every estate, or at least in every larger estate, having to be justified on an hourly or other basis in great detail."1 This is because allowing courts to lower fees changes the presumption in favor of statutory percentages from being irrebuttable to being rebuttable. They also recognize they would have to begin keeping time and work records (just like they do for nonprobate clients) because without them, there is no right to challenge or ability to defend a fee.

As noted earlier, HALT strongly opposes percentage fees having any statutory presumption of reasonableness in the first place. If you keep them, however, as a matter of simple fairness you must permit courts to reduce them.2 And to make the reduction right meaningful, you must give consumers the tools they need to have a chance of winning. This means requiring attorneys to: 1) keep detailed records of time spent and work performed and 2) execute written contracts containing a prominent notice of the statutory ,schedule and the client's right to bargain. Further, before the court rules on the attorney's fee, all interested persons should receive ample notice of: the basis for the request, their

1 Comments of the Executive Committee of the Estate Planning. Trust and Probate Law Section of the State Bar of California. First Supplement to Memorandum 88-12, at 2-3 (Feb. 24, 1988) {hereafter referred to as "Bar Comments.").

2 In recommending judicial authority to reduce fees, the staff advances "strict" standards the court could use to determine excessiveness, such as "clearly excessive .... " Memorandum 88-12 at 8. This "standard" gives the court absolutely no guidance. HALT-San Diego suggests something a bit more objectively ascertainable, such as "exceeds the attorney's hourly rate of compensation for comparable legal work by more than 10%." This means that a fee of more than $5,000 for an attorney who would normally get $4500 for 30 hours of similar (e.g., bankruptcy) work at $150/hour would be excessive.

3

right to object, and the procedure for doing so. Finally, once art objection is rued, the burden of persuasion should shift to the attorney to prove that the fee is not unreasonable.

Require Written Contracts for Probate Work and Add Special Provisions for Disclosure

HALT wholeheartedly supports the staff's recommendations to clarify the applicability of the new contract law to probate and require contracts to contain additional disclosures. The bar still offers no reasoned basis for its plea for exemption and its comments demonstrate that it still misunderstands or chooses to ignore the clear intent of the new law. HALT was actively involved in the debate over attorney discipline at the time SB 1569 was considered and HALT was present at Sen. Presley's press conference to announce the Governor had signed it into law. We won't repeat our previous testimony on this point. Suffice it to say that it was intended to address much more than just disclosing and memorializing the amount of the fee.

Delineation of What Constitutes "Ordinary" and "Extraordinary" Services; Allowance of Additional Compensation for Extraordinary Services Only to the Extent

Statutory Fee Doesn't Provide Reasonable Compensation

In its comments, the Probate Section opposes "any effort to delineate what is ordinary and what is extraordinary on a statutory basis in great detail" because it would likely result in "unfairness."3 Unfairness to whom they don't say, but one must presume the unfairness would be to attorneys from not getting paid for performing a service not on the list. The bar also opposes the staff's suggestion of devising flat fees for certain services because the complexity of estates (and thus amount of work required) can vary greatly from estate to estate. Finally, the bar vehemently opposes the recommendation that extra fees be allowed only if the statutory fee for ordinary services doesn't yield reasonable compensation. The reason? Again, "such an approach would substantially undermine the concept of statutory compensation for statutory services" and "involve a justification of the statutory fee in every estate where extraordinary fees were sought, including ... complex[ity] ... , hours spent and other ... factors."4

No comments of the bar on the staff recommendations so reveal the bar's disingenuousness and the bankruptcy of the statutory percentage fee system as its comments on these two recommendations. The bar argues both sides of the coin when it suits their purposes. Variance from estate to estate in the complexity, amount of time . spent or work required, risk for the attorney, and so on is of no concern to them when they argue in favor of percentage fees "for statutory services" and their inherent reasonableness.

Yet, when it comes to recommendations like spelling out what constitutes a "statutory service" vs. an "extraordinary service" or setting flat fees for certain services, all of a sudden the varying complexities, risks, and time required to do the work take on

3 Bar comments at 4-5.

4 Bar comments at 5-6.

4

tremendous importance. All of a sudden, the particulars of each individual case must be looked at in determining fees. Are you going to let the bar have it both ways - ignoring the time and work required when they want their percentage fees but taking into consideration the time and work required when they want more for "extraordinary" services?

And what happened to the bar's "simplicity of computation" and "easy for clients to understand" arguments? Wouldn't flat fees be easy to compute and understand? Don't misunderstand. We aren't saying that flat fees should be imposed for any or all services. But doesn't all this sound just the teeniest bit inconsistent to you? The result of these inconsistencies is that attorneys get assured minimum fees plus extra for "extraordinary" services, and the consumer gets ripped off.

In arguing here that differences from estate to estate should be taken into account, at least the bar agrees with what we've been saying all along: consumers should be charged on the basis of the time spent and work performed. By basing fees on estate values with no regard for individual circumstances, consumers are already paying flat fees.

If the percentage fee system persists, HALT definitely supports the staff's recommendation that extra fees be permitted only to the extent that the fee allowed for ordinary services isn't "reasonable." But why go through all the gymnastics of ordinary vs. extraordinary services, probate work vs. nonprobate work, deciding when to look at compensation already provided for ordinary services, and other meaningless distinctions? If you just got rid of the statutory fee system and the arbitrary distinction between probate and nonprobate work, you would simplify the law, open up the system to price competition, lower legal costs for the surviving relatives, and permit those who are paying the bill to decide whether they wanted to pay percentage fees, hourly fees, flat fees, or some combination of the three.

Other Staff Recommendations

Add Statutory Statement of Factors Used To Determine Reasonableness of Fees

As noted in our January statement, the law should specify that attorneys are entitled to collect a reasonable fee and precisely defme objective factors to be taken into account in determining reasonableness. In HALT's view, the fairest and most objective basis for determining ft!es is time actually spent and work actually performed. These factors already encompass all of the legitimate factors on the ABA's list but are more easily ascertained.5

Add a Minimum Fee for Small Estates or Allow Contracts for Fees Higher Than Statutory Percentage

HALT opposes statutory fees, and especially statutory minimum fees. If attorneys want to set a minimum fee for handling small estates, that's their business. As the California legislature has recognized, small estates shouldn't be subject to probate or

5 See HALT's prior testimony in the Commission's Minutes at 16 (Jan. 14-15, 1988).

5

require legal assistance to administer. But as long as some do, attorney-client contracts should be required and the parties should be free to bargain over price.

Lower Percentage from 4% to 3% on First $15,000

HALT supports the reduction, but we are not satisfied with such cosmetic changes merely so "it can be said that the maximum percentage rate ... has been reduced from four percent to three percent. "6 As the staff and bar note, the 4% figure is applicable only to the first $15,000 and estates of this size rarely go through probate anyway.

Require Court To Determine Reasonable Fee for Estates Worth over $10,000,000

HALT supports any reduction in the applicability of unexamined, unjustified, statutory, percentage fees. Although we are more concerned about low- and middleincome consumers who simply can't afford unnecessary siphoning of their inheritances off to professional fees, it's the largest estates, for a variety of reasons, that are most likely to result in the biggest windfalls.

Recommendations Concerning Attorney Who Serves as Personal Representative or Performs Some Duties of Personal Representative

In HALT's view, the Presley contract law already requires attorneys to execute written contracts with clients when the fee is expected to exceed $1,000. Moreover, according to the law, such contracts are already required to delineate who will perform which tasks, among other terms. Thus, we agree with the bar that no statutory change is necessary in this regard. But we agree with the staff that these (and other) contracts should not require automatic approval or review by the court unless an interested person petitions for such review. Finally, the consumer should be billed at the rate charged by the person who actually did the work.

Although our reasons are different, HALT also agrees with bar in opposing the staffs recommendation to permit attorneys in dual roles to collect dual fees. In other states where this arrangement is permitted, it has led to increased potential for doubledipping and other fee abuses. To have any chance of working, attorneys must be required to keep detailed time and work records delineating legal from nonlegal work, a largely meaningless distinction in the probate context anyway. As long as the present system is retained - windfall percentage fees, no requirement to keep detailed records or justify fees, and large-scale rebellion against a new law requiring contracts - HALT sees no justification for compounding lawyers' gold mines and consumers' woes.

Permit Compensation for Services Rendered by Paralegals at a Reasonable Paralegal Rate

Whenever a paralegal does the work, whether on ordinary or extraordinary tasks or on probate or nonprobate property, the client should be billed at the paralegal's rate. As we noted in our January statement, because probate is so routine, the vast majority of

6 Memorandum 88-12 at 5.

6

· . California attorneys already delegate probate work to paralegals. When this happens, the savings should be passed on to consumers.

In fact, we have an even better suggestion. We urge the Commission to recommend to the Legislature that the law be amended expressly to authorize nonlawyers to provide assistance and perform routine legal tasks associated with probate without the supervision of attorneys. Paralegals across the state are already doing this work, largely unsupervised, anyway.

The bar already has a monopoly over the provision of legal services; why allow it also to maintain this unnecessary "tying arrangement" whereby consumers are forced to pay lawyers' fees to get the services of paralegals? Opening up probate to independent paralegals would probably do more to lower legal fees than any other reform.

In conclusion, HALT - San Diego implores you to take advantage of this opportunity to make legal services more affordable and accessible. Abolish the statutory percentage fee system and replace it with a requirement that fees be reasonable and based on documented time spent and work performed. If, for some reason, you decide to recommend keeping it, however, we ask that you explain your decision and in addition, recommend the reforms we've urged above.

Thank you for your attention. I'd be happy to answer any questions you may have.

Respectfully Submitted by:

Charles Mosse HALT - San Diego 13708 Nogales Dr. Del Mar, CA 92014 (619) 755-7915

7

EXHIBIT 3 6/213/007072-0093/25

REPORT

'l'O: VALERIE J. MERRITT D. KEITH BILTER IRWIN D. GOLDRING CHARLES A. COLLIER, JR. JAMES D. DEVINE JAMES C. OPEL THEODORE J. CRANSTON JAMES V. QUILLINAN THE EXECUTIVE COMMITTEE IN GENERAL

FROM.: WILLIAM V. SCHMIDT, STUDY TEAM NO. 1

DATE: MARCH 7, 1988

SUBJECT: LRC MEMORANDUM 88-7






time to arrange· a conference call to receive the input of the

.entire study team.

This memo concerns the Marital Deduction Gift Statute

Sections 21500-21541. To my knowledge this is not an area on

which Study Team No. 1 has been previously requested to

cqmment. The proposed amendment to Section 21525(a) seems

worthwhile to me as an amendment which is consistent with the

general legislative intent and an amendment which would be

helpful to those administering marital deduction gifts.

Respectfully submitted,

I?<.!/d~ William V. Schmidt

, , . EXHIBIT 4

6/213/0007072-0093/27

REPORT

TO: VALERIE J. HERRITT D. KEITH BILTER IRWIN D. GOLDRING CHARLES A. COLLIER. JR. JAMES D. DEVINE JAMES C. OPEL THEODORE J. CRANSTON JAMES V. QUILLINAN THE EXECUTIVE COMMITTEE IN GENERAL

PROM: WILLIAM V. SCHMIDT, STUDY TEAM NO. 1

DATE: MARCH 7. 1988


SUBJECT: ASSEMBLY BILL 2779 AS AMENDED FEBRUARY 22. 1988

'This report is prepared on behalf of Study Team No. 1



March 10 and 11. 1988, I did not feel that we had sufficient


entire study team. ,

I understand that this bill was referred to Study Team

No. I because some of the matters contained therein have

previously been studied by our Study Team. However. other

matters in the bill have no~ previously been reviewed by our

Study Team. I am uncomfortable in reporting on the latter,

particularly without the benefit of other members of our

Study Team, but do so for whatever help this report may

provide.

• . . 6/213/0007072-0093/27

Section 1 Civil Code Section 63. It would have been

helpful if the bill had indicated one way or another the

proposed change to be made in the section. Assuming that

subdivision (13f was the only area of change, the change from

Section 649.1 to Sections 13502 and 13503 of the Probate Code

is correct.

Section 2 -- Civil Code Section 990. The only change

that I could find here was in subdivision (4) of subdivision

(d). The change is satisfactory.

Section 3 -- Civil Code Section 1086. Subdivision (4)

of subdivision (e) has been deleted. This deletes the

reference to old Probate Code Section 670 which has been

repealed.

Section 4 -- Civil Code Section 1089.5. This is a new

section and it seems to be satisfactory.

Section 5 -- Civil Code Section 2322. Satisfactory.

Section 6 -- Civil Code Section 2467. It is not clear

to me where the proposed new section changes the existing

section. The proposed change is not highlighted or in any

way indicated on the face of the bill.

Section 6.5 -- Civil Code Section 2502. The change is

highlighted and correct.

-2-

I . . 6/213/0007072-0093/27

Section 7 -- Food and Agricultural Code Section 62708.5.

It is not clear to me how this section amends existing law.

I only see that the words "as defined in the Probate Code"

have been removed from subdivision (b).

Sections 8, 9 and 10 -- Government Code Sections 26827,

26827.4 and 26827.5. These provisions are satisfactory for

the time being. I would like to alert the Commission and the

staff that the Probate Administration Committee of the State

Bar Executive Committee is, currently in the process of having

a report done by one of its subcommittees. Serving on this

subc6mmittee are representatives from the Office of the

County Clerk of Los Angeles, Orange County and Alameda

counties. The study will encompass these sections as well as

the general topic of filing fees in probate matters. We

assume that the Commission and staff will be receptive to the

results of such a study which we hope will be completed in

the next few months.'

Section 11 -- Health & Safety Code Section 7902.

Satisfactory.

Section 12

Satisfactory.

Insurance Code Section 11580.3.

Section 13 -- Probate Code Section 1143. The change in

the reference from Probate Code Section 950 to Probate Code

Section 11420 seems correct.

-3-

t '. 6/213/0007072-0093/27

Probate Code Section 3002. The change is correct.

Section 15 -- Probate Code Section 9052. Satisfactory.

Section 15. 3

Satisfactory.

Probate Code Section 11421.

Section 15.7 -- Probate Code Section 13106.5. This is

the subject of Memorandum 88-10 which has been expanded by a

First and Second Supplement. The First and Second

Supplements are being reported on concurrently with this

report. The staff has proposed changes to this new section

and we expect that the Commission may very well adopt some of

those changes. Hopefully, those changes will be in time to

be included in this bill.

Sections 16, 17 and 18 all expand certain sections of

Part 1, Division 8 pertaining to the collection or transfer

of small estates without administration by adding to those

sections that they do not permit the enforcement of a claim

that is barred under Part 4 (commencing with Section 9000 of

Division 7). These proposed changes are satisfactory.

Section 19 -- Probate Code Section 15401. It is not

clear to me where this proposed new section amends or

modifies the existing section.

-4-

,.. .... 6/213/0007072-0093/27

Section 20 -- Probate Code Section 21520. The only

change that I see is the inclusion of the word "tax" after

the words "federal gift" in subdivision (al. This change is

satisfactory.

Section 21 -- Probate Code Section 21521. Satisfactory.

Section 22 -- Welfare and Institution Code Section 6254.

Satisfactory.


William V. Schmidt

-5-

•

EXHIBIT 5 6/213/007072-0093/26

REPORT

'1'0: VALERIE J. MERRITT D. KEITH BILTER IRWIN D. GOLDRING CHARLES A. COLLIER, JR. JAMES D. DEVINE JAMES C. OPEL THEODORE J. CRANSTON JAMES V. QUILLlNAN THE EXECUTIVE COMMITTEE IN GENERAL

FROM: WILLIAM V. SCBM.IDT, STUDY TEAM NO. 1

DATE: MARCH 7, 1988

SUBJECT: FIRST SUPPLEMENT TO LRC MEMORANDUM 88-8







entire study team.

The matter of priority for appointment as administrator

CTA first came to our attention in the First Supplement to

Memorandum 88-2. The proposed revision there would strike

out the concept that a person who takes under the will has

priority over one who does not and seemed to introduce the

concept that persons taking the greatest share have the

highest priority. In our report dated January 8, 1988, our

team expressed great concern over this proposed revision.

• • -. 6/213/007072-0093/26

Later, in Memorandum 88-8, the staff changed the

language to Section 8441 to a concept which is satisfactory

to our team. The concept of a person who takes under a will

having priority 'of one who does not has still been retained

but the new section would allow the court in its discretion

to give priority to a person who does not take under the will

if that person will take a substantial portion of the estate

and the priority appears otherwise appropriate under the

circumstances.

Turning our attention then to the First Supplement to

Memorandum 88-8, we believe that the letter of Larry R. Cox

of Bakersfield tends to support the Commission's current

approach which we support.

A good portion of the remainder of the First Supplement

to 88-8 involves litigation involving a decedent. This is

not a matter which, to my knowledge, has previously been

reviewed by Study Team No. 1 and our team does not have

sufficient time to collectively review it. I prefer not to

comment on it by myself as it is not a matter with which I am

familiar.


William V. Schmidt

WVS/ds

-2-

EXHIBIT 6 Minutes ESTATE PLANNING, TRUST AND

PROBATE LAW SECTION

RE<:..EIVED March 10-11, 1988

MAR 8 - 1988 .....

D. UITH ItLTE.J..'- F-ua THE STATE BAR OF CALIFORNIA « V~J. MERRITT -~N n COLD"RING, 1M A.,u: D ltUTH IIJU'U..'-""" CPItIlf G. nou..s-J-IawJN n GOUd.ING., Z-....., --Lt.THRYN A. 'lALLSUN, 1M A..,.. JOHN A. GIDNALA, E __ lYNN P. H.U3' .... .-...-.

KEIlMION'E. K. BRCM'N'. t.A.,THWOOREJ. CRANSlUN. L..ft& U.DYD w. HOMER., c-;MJ KLNNETHM.KLUG,~ JAMES C. OPEL. 1M A~ LmNAllD W. POLLARD.. II. s.. ~ JAMES V. Q.UILUNAN, M~ ...... WILLlA.M V. SCHItoUur, C,*I. 114_ HUGH NEAL WELLS, 111, ,_ JAMES A. WlLLETT.'---'

.... 1.· ''',..

FEDERAL EXPRESS

Valerie J. Merritt, Esq. KINDEL·& ANDERSON 555 South Flower Street Los Angeles, CA 90071

555 FRANKUN STREET SAN FRANCISCO, CA 94102-«98

(tI5) 561-8200

March 7, 1988

Re: Assembly Bill 2841 (Study Team No.2)

Dear Valerie:

AHtR L HlL&ER.. L. A.,... WJLUAN L HOISINGTON . .Ii. .v....aUA1'1JCE LAlDLE.ltl.AWSON, 1M .11..JAY UIIS MaE:MAHON. SMIUJ-I 'YALD.[l.j. NEaRITT, LM Jbt* MIM.AAJ. MILLEJl. o.u-.I U11C! S. ItOSS, t. .... .,. snaUNG L ItOSS,Jk .• J,iiJ1 ~ ANN E.. SlOODEN". LM A.,. .,JANn" L WlUGKT. """-

Team No. 2 is responsible for a review of pages 157 through 180 of A.B. 2841. Our comments are as follows:

1. Page 166, line 15: There is a '$' in the line that should be omitted.

2. Page 166, Line 28: The word 'that' should be deleted and the comma which precedes section 7604 should be moved to follow the section number so that the line reads as follows:

·to the dollar limitation specified in section 7604, has.·

3. Page 176, Line 11: The fifth word in that line should read: 'set'. There is an obvious typographical error in the Bill.

4. Page 179, Line 33: It is proposed that section 17208 of the Probate Code be repealed. New Section 1003 (page 36 of the Bill) re-enacts the provision, making it applicable to proceedings beyond trust proceedings. In old section 17208, Sections 372-373.5 of the Code of Civil Procedure are negated; this is not in new Section 1003 and the Bill does not appear to repeal Sections 372-373.5. Is this an oversight?

Mr. John H. DeMoully March 10, 1988 Page Two

5. Page 29, line 8: The word "guardian" is misspelled.

6. Page 29, line 39: The word "administered" is misspelled.

CAC:vjd cc: D. Keith Bilter, Esq.

James Quillinan, Esq •. James Devine, Esq. Valerie Merritt, Esq. James Opel, Esq. Irwin Goldring, Esq.

/~.t / <~/ /_~ Sin~erel .. :if"'.' /~ "/ ,.' ~ .. ->

Charles A. Collier, Jr.

a.;,

EXHIBIT 7

ESTATE PLANNING, TRUST AND PROBATE LAW SECTION

'Minutes March 10-11, 1988

Eantiw c.-itt« llOYD W. HOMER, C.:.mpMI

V"-cMI'.

THE STATE BAR OF CALIFORNIA KATHRYN A. MLLSUN, I..s A"p D. KEITH BitTER. Sat J1a1llu.:.. OWEN C. FIORE, Sut).u D. KEITH BILTER, SuI Fraru:i-J JOHN A. GROMALA, E.rrIa --HERMIONE K. BROWN, l.fIS A"fth,r ANNE K. HILKER. tAr A.,nts WILLlAM HOISINGlDN • .s... nr.LLOYDW. HOME.R, C~ THEODORE]. CRANSTON, laJol/rl

JAMES n DEVINE, Mliftlnry JAY ROSS MacMAHON, 5dn /af-/ STERUNG L ROSS, JR., Mill iWlr:II WILLIAM V. SCHMIDT. Corti! M_ CLARE H. SPRINGS, Sa ~ ANN E. STODDEN, Ur A..,«a

IRWIN 0. GOLDRISG, 8 .. ~1y rfdt. KENNETH M. KLUG, Frt$.114

JAMES C. OPEL, fAr A~gN$

LEONARD W POLLARD [I. Son Di~ JAMES V. QUILLINAN, Moy"ui .. lIiow JAMES F. ROGERS. Lor A_pits 555 FRANKLIN STREET

SAN FRANCISCO, CA 94102-4'98 (415) 561-8200

JAMES A. WILLETT, ~ JANET L WRIGHT. h:ru

HUGH NEAL WELLS III, /rlJiM DIANE C. YU. CId.I..c

~AJN~

PRES ZABLAN-SOBERON

March 10, 1988

Mr. John H. DeMoully California Law Revision Commission 4000 Middlefield Road, Room D-2 Palo Alto, California 94303-4739

Re: AB 2841

Dear John:

Members of the Executive Committee of the Estate Planning, Trust and Probate Law Section, State Bar of California, are submitting individual comments of a technical nature on various portions of AB 2841. A number of these have already been received and are in,cluded in supplements to Memo 88-8.

The following are my technical comments on pages 1 through 15 and 24 through 33 of the Bill. These comments are personal to me and have not been reviewed by the Executive Committee.

They are as follows:

1. Page 6, lines 14-15: I do not understand the reason for the reference to "order notice of settlement of supplementary accounts," since I believe the court has power in a number of situations to order shortened or additional notice of any number of different types of petitions, accounts, etc.

2. Page 6, line 16: The letter Its" should be added to the word "representative."

3. Page 11, line 8: There is a punctuation error following the word "personally."

4. Page 13, line 2: The phrase "of an executor or administrator" for consistency should .be replaced with the term "personal representative" which is defined in Section 58(a) to include persons who perform a like function in other jurisdictions.

Ms. Valerie J. Merritt, Esq. March 7, 1988 Page 2

If yo'u have any questions concerning the suggestions above, please call.

'l'JC:gm

cc: Charles A. Collier, Jr., Esq. James D. Devine, Esq. James C. Opel, Esq. James Quillinan, Esq. Irwin D. Goldring, Esq. William V. schmidt, Esq. Jay Ross McMahan James R. Goodwin William H. Plagman, Jr. OWen G. Fiori Kenneth M. Klug Beatrice Laidley-Lawson

(619) 456-3010

ve~yours.

TheOdore J. Cranston for GRAY, CARY, AMES & FRYE

1\ ,

f,

I

I , .

. . , I ~

Phyllis Cardozo Independent Legoi Assistont

March 10, 1988

EXHIBIT 8 Minutes March 10-11, 1988

1100 Glendon Avenue. SUIte 1529 los Angeles, Colifornia 90024

(213) 8794174 (213) 208-6087

BEVERLY HTIJ·S BAR ASSOCIATION PROBATE, TRUST, & ESTATE PLANNING SECTION

SUGGFSI'ED AMENIlMENl'S TO AB 2841

(References are to bill as introduced January 1 6, 1 988)

§ 8121. Publication of Notice (Page 83, lines 19-23)

(a) NeEiee-sha±±-Se-~HB±ishea-fer-aE-±easE-+G-aays7 Publication

of the notice shall begin at least 15 days before the hearinq. Three

publications in a newspaper published once a week or more often, with

at least five days intervening between the first and last publication

dates, not counting the publication dates, are sufficient.

BHBA Comment. i. It has always been unclear what is meant by:

"Notice shall be published for at least 10 days." when contrasted with the sentence that follows, allowing only five days to intervene between first and last publication. The legar-newspapers in Los Angeles have determined that it means publication should begin 10 [or 151 days before the hearing date. Thus, we suggest the underlined language.

ii. In addition, we note that in §8110, notice is to be mailed 15 days before the hearing, your 1-20-87 original draft of this section calls for publication for 15 days, and the present §333 effective 7-1-88 calls for 15 days. Therefore, we assume it was an oversight to revert to 10 days in AB 2841 as introduced.

PC:MISC:LTDPUB/3-10-88 -1-

•

BEVERLY HTTJS BAR ASSOCIATION PROBATE, TRUST, & ESTATE PLANNING SECTION SOQZSI'EIJ ~ TO AB 2841

(References are to bill as introduced January 16, 1988)

Notice of Death: No Republication For Reissued Letters

8~25T~-eeRteRts-e£-saeS~eRt-~aelisRea-eF-pestea-RetieeT-fPage 84, lines 35-38)

NetwitRstaReiR~-SeatieR-8~GG7-aEEeE-tRe-ReEiae-eE--ReaFiR~ is-~lisRee-aRe-aR-aEEieaviE-Eilea7-aRy-saBse~eRE-~aBlieatieR-e€ £Re-R9tiee-may-emiE-tRe-iaEeFmaEieR-EeF-eFeeieeES-aRe-eeREiR~eRE m;eeieeFsT

BHBA Comment.

When the already-appointed personal representative of an estate dies, resigns, or is removed, and another person petitions to be successor representative, or when someone petitions for admission of another will or codicil after letters have already been issued to a persor~l representative, present law requires republication of the notice of death and administration of the estate, leaving out the notice to creditors. However, persons interested in the estate have either already received mailed notice of the proceedings, or have filed a request for special notice in the proceedings.

If anyone is seeking to admit another testamentary document or to change the personal representative, notice of the new petition will be mailed directly to the parties affected by that new petition. Section 8522(b) of AB 2841 calls for only "service of notice on interested parties", which would seem to remove the necessity of republication. In any event, even without the notice to creditors, republication is redundant and is an unnecessary expense to the estate.

Typographical errors

§8004 (Page 79, line 21) (a) If appointment of the personal Ee~EeSeRtaEaive representative

is contested, the ~9HRBS grounds of opposition may include • • • •

EXHIBIT 9 _. --. ...... -" California Bankers Association

Mr. John H. DeMoully Executive Secretary

&tablisWI891

March 7, 1988

California Law Revision Commission Suite D-2 4000 Middlefield Road Palo Alto, California 94303-4739

Be: Trustee Fees

Dear Mr. DeMoully:

Minutes 5~ f~:§g/~-ll, 1988

Th'e Trus"t State Governmental Affairs Committee of the California Bankers Assoc~ation has received a copy of a letter from Assemblyman Elihu Harris to the Commission transmitting concerns that the Assemblyman apparently still has regarding trust industry practices.

We disagree with the factual premises of several of the assertions made by Mr. Harris. The following is a roughly sequential response to certain of the statements in Mr. Harris' letter.

1. The subject matter of the San Diego Union article (which we note is at this point over a year old), attached to Mr. Harris' letter does not illustrate any problem reasonably related to the reason behind the 1982 legislation (AB 3612) referenced in the first paragraph of his letter. Mrs. Hinman resolved her fee dispute with her then current trustee by asking that trustee to resign in favor of another corporate trustee, which in fact occurred. The solution to Mrs. Hinman's concern illustrates the method by which beneficiary disputes are frequently handled by corporate trustees: Voluntary agreement.

2. If a request is to be made to the California Law Revision Commission to explore the relationships between trustees and beneficiaries, then it is appropriate to have the scope of the inquiry reach all trustees and not merely -bank trustee departments w• It strikes us as inherently unfair that corporate trustees be discriminated against by being the target of a vague and unstructured investigation. For instance, while the terms wconsumer" may have some meaning when used in connection with the individual initially establishing the trust relationship, under the California

650 California Street, Suite 1001, San Francisco, California 94108 (415) 43~-1894

".-.

Mr. John DeMoully March 4, 1988 Page 2

Trust Law, the term wbeneficiaryR is clearly defined in Probate Code Section 24, and nowhere is the term Rconsumer" used. What class of individuals is intended to be included by ~se of the term consumer? We also question the significance of the comment that some beneficiaries have chosen not to be represented by legal counsel. Such beneficiaries are neither compelled to retain counsel nor are they prohibited from retaining counsel. In addition, the Bankers are gravely concerned about the characterization of trust estates of under $1,000,000 as being Rsmall". The experience of the California Bankers Association with its member trust banks is that there is no consensus of what constitutes "small W trust estates. Indeed, at least one major corporate trustee markets trust services for accounts of $50,000 in size. We also question use of the term ·disproportionate" with respect to fees, regardless of the size of a trust estate. An appropriate fee for any trust is of necessity a function of the trustee's responsibilities and risks incurred under the governing agreement, the nature and complexities of the trust assets, and the needs of the beneficiaries.

3. We would like to respond to what amounts to an accusation that corporate trustees refuse to act as trustees of smaller trust estates. In examining what trust business should be accepted, corporate trustees should not accept accounts believed at the outset to be unprofitable. To do otherwise is to violate the trust and confidence imposed on the management of trust institutions by their boards of directors, and ultimately, their shareholders. Moreover, because it is widely known that the profitability of corporate trustees has been marginal at best, operating any unprofitable business (whether the account is, relatively speaking, small or large), is simply irresponsible.

4. Most trusts provide a mechanism for the removal of a trustee and the appointment of a successor, which mayor may not call for court intervention. In the absence of such mandatory guidance, the trustee is frequently compelled to seek court assistance as a part of the process of having an account transferred from one trustee to another. To illustrate the point we offer the following hypothetical fact situation. An individual creates a trust and does not provide for the qualifications or identity of a successor trustee. Beneficiary/spouse of a subsequent marriage wants ·X· to serve. Beneficiary/children of a prior marriage want .y. to serve. The trustee is obligated under Probate Code


Section 16003 to deal impartially with the beneficiaries. Consequently, what choice other than seeking court intervention would satisfy that duty? Indeed, in general the intE!rvention of the court has long been intended to provide continuity and order to the administration of trusts for the purpose of protecting the interests of all trust beneficiaries.

5. We take exception the statement that "a substantial number of trust beneficiaries" are "unaware of fee increases which would give them cause to complain". Most, if not all, corporate trustees provide prior written notice of fee increases. In addition, trust beneficiaries receive regular statements which disclose fees charged. Conceining Mr. Harris' comments as to the reasons for which a beneficiary does not seek the advice of an attorney, we do not feel it is appropriate for the California Bankers Association to address the issues of the costs of legal services or the factor of the intimidation of beneficiaries by attorneys. It is said that banks have made fee increases which they represented to the Legislature would not be made. While it is true that fee increases may have been initiated in response to inflation and increased operating costs, the competitive pressures of the marketplace have kept these increases to reasonable levels and there has been no immediate explosion in fees as charged by the opponents of AB 3612. This fact is the essence of what was represented to the Legislature and the California Bankers Association has remained true to its word.

6. We do not understand why Mr. Harris has chosen to raise the issue of executor and administrator fees in the context of the discussion of trustee fees. For an objective analysis of the issues, we refer to the Law Revision Commission Staff memoranda considering the subject. Memorandum 88-12 dated 1/22/88 (Attorney fees in Probate), and Memorandum 88-13, dated 2/1/88 (Fees of Personal Representatives).

7. The ·problem" referenced in the second full paragraph of the second page of Mr. Harris' letter focuses on the refusal of corporate trustees to accept appointment as executor or administrator unless an estate is a "sizable one". We are unclear as to the intended meaning of this statement. Corporate trustees evaluate each estate on its own merits in terms of size, complexity, and risk. Take a hypothetical example: A corporate fiduciary is nominated in a will to serve as an executor. While the estimated fair market value of the estate, which consists primarily of real estate, is


$8,000,000, the institution might decline to act upon being advised that one of the properties of the estate was an abandoned dump site selected by the Environmental Protection Agency for hazardous waste clean up. The risks and complexities of administering this type of asset could well outweigh any fee considerations based on the size of the estate, and would bear careful analysis as a condition precedent to accepting the business or turning it down.

8. The California Bankers Association has been advised by Wells Fargo Bank that the example used in Mr. Harris' letter regarding Wells' probate'practices is not accurate. The CBA is further advised that Wells Fargo Bank has addressed this subject in a separate letter to Mr. Harris.

9. The characterization of corporate fiduciaries' policies of determining what ~states they can act in profitably as ·skimming the cream" is highly inflammatory and unjustified. No negative connotation should be attached to the business decision to accept estates which are considered to be profitable and for which no unreasonable risks of liability are likely to be assumed. We do not understand the reference to the so called "Robin Hood theory". Whatever is intended by the reference to the "Robin Hood theory·, we cannot accept a ·compensation scheme" that adopts as its philosophical foundation the inequitable charging of larger probate estates to offset the uncompensated or undercompensated costs of administering smaller estates. Every probate estate must stand on its own and adequately compensate the personal representative for the services being performed.

10. Beneficiaries are not unprotected and have recourse to the courts on trust fees. If by "automatic protection" it is meant that statutory trustee fees would be appropriate, the California Bankers Association would oppose vigorously any such proposal. '

11. With respect to the request that questionnaires be sent to bar associations for the ostensible purpose of surveying the ·appropriate consumer population," it would appear that such an inquiry is unfocused and unnecessary in view of both the previous questionnaire directed to those attorneys most directly involved in, and most familiar with, the issues of trustee services and fees, as well as the questionnaire directed to corporate fiduciaries who voluntarily completed and submitted responses in good faith to the Law Revision Commission. We question the public benefit of additional

Mr. John DeMou11y March 4, 1988 Page 5

surveys of a broad population which, more than likely, has little interest or familiarity with the issues.

We have formally advised Assemblyman Harris that the California Bankers Association believes that there is no problem regarding trust administration issues which require a legislative solution. The CBA has not changed its very strong belief in this regard. Nevertheless, we recognize that there is a perception that such a problem exists, as evidenced by Mr. Harris' subject January 26, 1988 letter. Accordingly, in the spirit of further promoting the interests of trust beneficiaries, the CBA has drafted a legislative proposal, a copy of which is enclosed.

Thank you for your consideration of our views on this most important area of the law. If we can supply additional information, we welcome the opportunity to meet with you.

David W. Lauer L. Bruce Norman Co-chairmen, Trust State Governmental Affairs Committee

cc: The Honorable Elihu Harris Stan Wieg

March 7, 1988

Existing: Increase in Compensation

15681 (a) existing

15681 (b) The trustee may increase its rate of percentage compensation

or its stated minimum fee (hereinafter ·compensation-) only

after compliance with the requirements of this Section.

(1) The trustee shall.provide notice in the form specified in this

Section in writing at least sixty days prior to the stated

effective date of the increase to all beneficiaries, as

defined in Section 15681(b) (4), of trusts affected by the

increase.

(2) The notice shall contain the following information:

(a) The effective date of the increase.

(b) The current and the proposed compensation.

(c) The name, address and telephone number of the person or

persons representing the trustee to whom questions may be

addressed.

, (3)

(d) A statement that if all of the beneficiaries as defined in

Section 15681(b) (4) advise the trustee in writing prior to

the effective date of the increase specified in the notice

of their objection to the increase, no increase will be

implemented until the trustee complies with Section

15681 (b) (3) •

(e) A statement that any beneficiary may petition the court

pursuant to Section 17200 to review the increase to the

trustee's compensation, and that if the petition is filed

and notice is given to the trustee prior to the effective .

date of the increase, such increase shall not be

implemented until confirmed by order of the court.

If all of the beneficiaries as defined in Section 15681(b) (4)

object to the proposed increase, and advise the trustee in

writing prior to the effective date of the increase, the

trustee shall do one of the following:

(a) Withdraw or compromise the proposed increase to

compensation~ or

(b) Postpone the proposed increase for a period not to exceed

30 days subsequent to the effective date of the increase

to enable the beneficiaries to file a petition under

Section 17200 to review the proposed increase and to serve

notice on the trustee; or

(c) Resign as trustee pursuant to Section 15640. The trustee

shall incur no liability to the beneficiaries by reason of

the exercise of this power to resign.

(4) For purposes of this Section, the term beneficiary shall

include those beneficiaries specified in Section l6062(a),

subject to the limitations in Section 15800. If such

beneficiary is a ward or conservatee, the notice required by

Section 15681 (b) (1) s,hall be sent to the guardian or

conservator, as the case may be, of such beneficiary. If such

"beneficiary is a minor for whom no guardian has been

appointed, notice' shall be sent to the parent having legal

custody of the minor. The guardian, conservator or parent of

such a beneficiary shall represent the interests of the

beneficiary for all purposes under this Section.

(5) If any beneficiary petitions the court under Section 17200 to

review the increase prior to the effective date of the

increase, such increase shall not be implemented until

confirmed by order of the court.

(6) If any beneficiary petitions the court under Section 17200

subsequent to the effective date of the increase to review the

increase, any determination of the court shall relate only to

the prospective application of the increase to compensation.

· .

(7) The court, in its discretion, may charge fees, costs and

.expenses of a proceeding under Section 17200 to review the

increase in the trustee's compensation against the trust

estate.

(8) This Section shall be applicable only to those trusts as

defined in Section 82(a).

note. changes may be made in this adl agenda. for meeting … · 2013-04-18 · ilevised meeting...

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